[amp_mcq option1=”statutory liquidity ratio” option2=”cash reserve ratio” option3=”reserve repo” option4=”government securities” correct=”option1″]
The correct answer is: A. statutory liquidity ratio
The statutory liquidity ratio (SLR) is a reserve requirement imposed by the Reserve Bank of India (RBI) on commercial banks in India. It is the minimum amount of liquid assets that banks are required to hold in the form of cash, gold, or government securities. The SLR is currently set at 18% of a bank’s net demand and time liabilities (NDTL).
The SLR is designed to ensure that banks have enough liquidity to meet the demands of their customers and to prevent a run on the banks. It also helps to control the money supply in the economy.
The SLR is a controversial measure. Some economists argue that it is an unnecessary and outdated measure that stifles lending and economic growth. Others argue that it is an important tool for monetary policy and that it helps to keep the financial system stable.
The RBI has been gradually reducing the SLR in recent years in order to encourage lending and economic growth. The SLR was reduced from 20% to 18% in April 2017.
The other options are incorrect because:
- B. cash reserve ratio is the minimum amount of cash that banks are required to hold in their vaults.
- C. reserve repo is a type of repurchase agreement (repo) in which the RBI lends money to banks against the security of government securities.
- D. government securities are bonds issued by the government of India.